Determinants of Retail Investors Behavior and its Impact on Investment Decision

Behavioral finance is an emerging science, and a relatively new and developing field of academic study that exploits the irrational nature of investors. Most of investment decisions are influences to some extent by our prejudices and perceptions that do not meet the criteria of rationality. Behavioral finance concentrates on irrational behavior that can affect investment decision and market prices. The rationale of this manuscript study is to analyze the determinants of individual investor behavior in Pakistani stock market. The study used primary date which was collected through questionnaire. Questions related to investors profile and determinants of investor behavior were included using a five point scale. Data collected were analyzed through SPSS and spread sheet. Analytic hierarchy process (AHP) is used to find the relative significance of different behavioral qualities of the investors in contributing overall investment behavior. AHP is one of multi Criteria decision making method to derive ratio scales from paired comparisons. The findings suggest that the dimension of overconfidence plays an important role in the determination of overall behavior.